Gordon Brown's promise to kick-start the economy with borrowing could cause the "collapse of sterling", George Osborne warned today.
The shadow chancellor risked accusations that he was talking down the pound as he mounted a ferocious attack on the Government.
He said the Prime Minister was pursuing a "scorched earth" policy, intending to leave the economy in ruins for when the Tories came to power.
In an interview with the Times, Mr Osborne said people instinctively understood that the state could not borrow itself out of trouble. The weight of debt would stifle recovery and create a major risk for sterling, he added.
"Sterling has devalued rapidly against the euro and the dollar," Mr Osborne said.
"We are in danger, if the Government is not careful, of having a proper sterling collapse, a run on the pound.
"The danger of a run on the pound . . . is that it pushes up long-term interest rates, which is a huge burden on the economy.
"The more you borrow as a government the more you have to sell that debt and the less attractive your currency seems."
Mr Osborne's words could be seen as breaching the convention that senior politicians avoid warning of runs on sterling - for fear that their words become self-fulfilling.
The pound slipped to a 13-year low against a basket of other currencies today.
Its value against the dollar rate fell below 1.48 dollars, while against the euro it reached a record low of 1.17.
Mr Osborne insisted he was ready to oppose any "unfunded tax cuts" unveiled by Chancellor Alistair Darling in the Pre-Budget Report on November 24.
"What we are in favour of is funded tax cuts," he said.
Responding to Mr Osborne's comments, a Labour Party spokesman said: "At their conference in October, the Tory leadership said they would support the Government in the difficult decisions we had to take to keep the economy on track.
"Just a few weeks later, a panicking George Osborne is trying to talk down the economy in a desperate last throw of the dice to save his career.
"David Cameron said responsibility was his moral guide. This is totally irresponsible from Osborne, and just shows that this is no time for a novice."